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Activision's Heroic Quarter

Activision (Nasdaq: ATVI  ) had good news to share in its most recent quarterly earnings report. Originality counts for a lot for the long term, but a smash hit game franchise can really bolster game publishers' short-term financial results.

Guitar Hero II is getting considerable credit for helping Activision swing to a first-quarter profit. The company reported net income of $27.8 million, or $0.09 per share, compared to a net loss of $18.3 million, or $0.07 per share in the prior-year quarer. Meanwhile, revenue increased an impressive 163%, to $495.5 million.

Unlike its rival Electronic Arts (Nasdaq: ERTS  ) , Activision was able to sweeten the deal by increasing its guidance for both earnings and revenue for fiscal 2008.

Activision certainly seems to have achieved a stellar position this year. The console upgrade cycle can be a real boon to game publishers, driving gamers to purchase new titles for their shiny next-generation consoles. In such a market, it helps to have the right games in the right place at the right time.

In its press release, Activision said that it's the No. 1 third-party publisher in the U.S. for both the console and handheld markets. The company cited NPD data that gauged its games' success on consoles and handheld platforms from Microsoft (Nasdaq: MSFT  ) , Sony (NYSE: SNE  ) , and Nintendo (OTC BB: NTDOY.PK). Most impressively, the NPD data shows that Activision doubled its U.S. market share from 8.5% to 16.9% year over year.

While Electronic Arts discussed the success of its new Harry Potter title, Activision's not slacking when it comes to summer movie sequel tie-ins. Its Spider-Man 3, Shrek the Third, and Transformers games all made a big splash with consumers, according to the company's earnings release.

Meanwhile, Activision and Electronic Arts are also expected to gain an advantage during the holiday season, now that Take-Two Interactive's (Nasdaq: TTWO  ) next iteration of its blockbuster game Grand Theft Auto will be delayed.

Right now, Activision really seems to be on the ball, while Electronic Arts seems to have a lot of work to do. Given its rosy quarterly tidings, Activision seems like a particularly appealing investment in the video game market.

Play on, Fools:

Activision, Electronic Arts, and Nintendo are Motley Fool Stock Advisor recommendations. Microsoft is a Motley Fool Inside Value pick. When you're not rocking out to Guitar Hero, try a free 30-day trial of either newsletter.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool's disclosure policy ignores all requests for "Free Bird."

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